Danone’s sales of baby milk formula in China rose strongly in the third quarter, beating forecasts and sending the French food company’s shares to a record high. 

Danone, owner of Activia yoghurt and Evian water, will spend about €325m to form a joint venture and invest in China’s biggest dairy producer to expand its brands in the most populous nation.

Nestlé, the world’s biggest food group, is closing in on a deal to buy Pfizer’s infant nutrition business for up to $10bn (€7.6bn) to boost its business in China and extend its lead in the world of formula milk for babies, sources familiar with the matter said yesterday.

Sales growth in infant formula and bottled water products have helped lift French yoghurt firm Danone to a 4.5% gain in annual earnings, according to its newly released 2011 accounts.